England: inordinate delay in delivering award is not sufficient as a ground to set it aside

International Arbitration Newsletter

The English courts have recently taken a firm position on a party's right to challenge an arbitral award on the basis of the tribunal's delay in producing that award. In B.V.Scheepswerf Damen Gorinchem v The Marine Institute (The "Celtic Explorer")1, Mr Justice Flaux confirmed that delay in and of itself will not be grounds for challenging an award under s. 68 of the Arbitration Act 1996. A party must also show that the delay has caused or will cause it substantial injustice – that is, that but for the delay, the arbitrator might well have reached a conclusion favourable to the appealing party. In this case, the court also rejected the argument that the tribunal failed to deal with an essential issue and that the failure to deal with that essential issue caused substantial injustice.

The Celtic Explorer

B.V. Scheepswerf Damen Gorinchem (Damen) sought to challenge an award handed down by a sole arbitrator in an arbitration against The Marine Institute (TMI). The dispute between Damen and TMI arose under a contract pursuant to which Damen was to build a multi-purpose research vessel, the Celtic Explorer, for TMI to purchase. The engines of the vessel were not commissioned at Damen's yard, but instead were commissioned in Holland after the vessel was towed there. During towing, additional distance plates were fitted to the engines to keep them in position. These plates should have been removed during commissioning, but they were not, and remained fitted when the vessel was delivered to TMI. Six years later, in 2008, damage was discovered that necessitated repairs and TMI commenced arbitration proceedings, asserting that the damage had been caused by the distance plates and that Damen's failure to remove the plates was a breach of contract. TMI claimed damages of around €2 million.

The arbitration

The arbitration hearing took place over three days in September 2013 before a sole arbitrator, by which time Damen had admitted that it was in breach of contract but argued that the presence of the plates had not caused the damage. Expert evidence on the cause of the damage was heard during the hearing, with both Damen and TMI's appointed experts being cross-examined.

Five months after the hearing, in February 2014, the arbitrator emailed the parties to inform them that he was aiming to publish the award in March 2014. Various emails followed from the arbitrator excusing further delays, with neither party chasing for the award nor complaining about the delay. The award was ultimately published on 23 September 2014, more than 12 months after the end of the hearing. The award found that that all loss and damage claimed was caused by Damen's breach of contract and negligence, with 30 pages of reasons supporting that conclusion. Damen's solicitors requested that the arbitrator correct the award and provide further reasons pursuant to s.57 of the Arbitration Act with respect to certain issues it contended the arbitrator had not dealt with in the award. The arbitrator refused this request, stating that no further reasons were necessary or appropriate.

Damen subsequently applied to the court to set aside the award pursuant to s.68 of the Act (on the grounds of a serious irregularity) on the basis that:

the delay in publishing the award was a failure by the arbitrator to comply with his general duties under s.33 of the Act (including the duty to adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay) and/or a failure to comply with the procedure agreed between the parties and

the arbitrator failed to deal with all of the issues put to him and/or failed to consider central issues and/or failed to take proper consideration of key evidence.

The judgment

Flaux J noted the difficulties Damen faced in showing that delay in producing the award was contrary to s.68 of the Act. While Flaux J held that an inordinate delay in publishing the award was capable of amounting to a serious irregularity as a breach of the arbitrator's general duty under s.33 of the Act, Damen was still required to show that the irregularity − in this case the delay − had caused it, or would cause it, substantial injustice. To satisfy this test, Damen would have to show that, but for the delay, the arbitrator might have reached a different conclusion more favourable to Damen.

Flaux J held that this would be an impossible test to satisfy unless Damen could show that there had been a failure to deal with all the issues, stating: "If the Award is otherwise unimpeachable and has dealt with all the issues, it makes no difference whether it was produced a month or twelve months after the hearing, since however long the Award has taken to produce, the applicant cannot show that it has caused or will cause substantial injustice." The delay in publishing the award would not, without more, justify setting aside the award under s68. It is the substance of the award that is key − an applicant would have to show that the award failed to deal with all of the issues, and that this failure caused the applicant substantial injustice.

Even if the delay were contrary to the general duty to avoid unnecessary delay pursuant to s.33 of the Act, or contrary to the terms under which the arbitration was conducted (in this case, the London Maritime Arbitrators Association terms, which provide that awards should normally be available six weeks after the close of proceedings), Damen would still need to show − in addition − that the delay caused, or will cause, substantial injustice.

Flaux J also rejected Damen's argument that the arbitrator had failed to deal with all of the issues put to him and/or failed to consider central issues and/or failed to take proper consideration of key evidence contrary to s. 68(2)(a) and/or (d) of the Act. Considering the award, Flaux J held that the two “issues” which Damen alleged were not dealt with were not “essential issues” for the purposes of s.68, and that in any event those essential issues had in fact been dealt with. Flaux J was clear that this case was a "classic example of a disappointed party saying it has been unfairly treated because its criticism of some piece of evidence has not been accepted and fully dealt with. This is indeed precisely the situation where the Court should not intervene and there is simply no basis for subverting that fundamental restriction on the scope of section 68 challenges in the case of delay".

Flaux, J concluded that the application was "no more than an impermissible attempt to criticise the arbitrator's evaluation and analysis of the evidence and must be dismissed".

Conclusion

Parties that have invested substantial time and money in arbitration proceedings can often be frustrated at the time it takes the tribunal to render its award. However, following Damen v TMI, parties receiving awards subject to inordinate delay should be aware that they will not succeed in an application to the English courts to have that award set aside on the basis of the delay, unless they can show in addition that such delay has caused or will cause substantial injustice, for example where a tribunal has failed to deal with all of the issues. This will be a test applied to the substance of the award and not to the delay in publishing it. The judgment serves as another example of the English courts' pro-arbitration position and unwillingness to interfere in the arbitral process unless fundamental interests of justice require it.

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DLA Piper is a global law firm with lawyers located in more than 40 countries throughout the Americas, Europe, the Middle East, Africa and Asia Pacific, positioning us to help clients with their legal needs around the world.